The Nifty and the Sensex ended the week with cuts as traders were unwilling to carry positions over the weekend in the midst of all the uncertainty in the market. The VIX has continued to trend lower below the 15 mark. A/D ratio was weak at 21:29 on Friday. Pressure came from IT and telecom stocks while metals and power PSUs like NTPC held the markets up.

On the last day of the week, the bond markets have been fairly tepid as yields are quoting at about 6.5% compared to 6.51% close in the previous trading session. The expectation in the market is still quite strong that the RBI will look at a series of rate cuts starting December and that is holding yields lower. The bond yields at the short end of the yield curve have also been tepid due to liquidity.

The rupee has been largely range-bound on Friday after a fairly volatile week of currency trading. The RBI has been supporting the INR at around the 72/$ levels and that has held the markets in good stead. On the positive side, the FPIs bought heavily into the markets on Thursday and that has given some support to the market. The rate cut would actually work against rupee strength.

The Brent Crude has been almost flat at around the range of $64/bbl where it closed on Thursday. The oil prices rallied sharply on Thursday on the back of instability in the Middle East and some major supply concerns coming from Iran, Iraq, Venezuela and Algeria. The recent drone attacks on Saudi Arabia have also been instrumental in creating a sense of concern in the oil markets.

Sectoral Viewpoint: Metals and media rally; IT and banks take a hit

Metal stocks continued to rally on Friday on hopes that the trade deal would be seen through after assurances from Xi Jinping over the first cut trade deal. Media continued to rally due to the Zee effect. On the downside, IT stocks took a hit after the visa issue has come up all over again. Banks also saw some profit banking over the week end after a sharp rally through the last two weeks.

News that markets reacted to

RBI has constituted an advisory committee to assist in the bankruptcy proceedings of Dewan Housing Finance. DHFL had defaulted on loans in excess of Rs.80,000 crore. Once the company has been referred to bankruptcy, the committee will first make an estimate of how much is recoverable and how much has to be written off. The norm in such cases has been 50%.

Fitch has raised some major questions over the prospects of the telecom sector in India. According to Fitch, the AGR charges are likely to pose a major burden on the telcos and the combination of SUC moratorium and the recent tariff hike is unlikely to offset the impact of the AGR charges. Telcos have already written off their AGR costs in the second quarter.

For the first time in the last five years, ICICI Bank is quoting at a premium to the valuations of Axis Bank. Since the NPA issue first came to light in both these banks some 5 years back, Axis has consistently been at a premium. The Axis premium had widened during the whistleblower complaint against the former CEO. Finally, ICICI Bank appears to be getting back to old P/Es.

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